Luther Burbank (NASDAQ:LBC) Is Due To Pay A Dividend Of $0.12

The board of Luther Burbank Corporation (NASDAQ:LBC) has announced that it will pay a dividend of $0.12 per share on the 15th of August. Including this payment, the dividend yield on the stock will be 3.6%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Luther Burbank

Luther Burbank's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Luther Burbank has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Luther Burbank's payout ratio of 26% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to fall by 25.1%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 34%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Luther Burbank Doesn't Have A Long Payment History

It is great to see that Luther Burbank has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the dividend has gone from $0.23 total annually to $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Luther Burbank has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Luther Burbank Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Luther Burbank has seen EPS rising for the last five years, at 5.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Luther Burbank's prospects of growing its dividend payments in the future.

In Summary

Overall, a consistent dividend is a good thing, and we think that Luther Burbank has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Luther Burbank (of which 1 is a bit concerning!) you should know about. Is Luther Burbank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.